Many of the state Senate races are shaping up as a referendum on oil taxation, which is appropriate given oil accounts for about 90 percent of the state budget, and oil and gas issues will dominate the next Legislature's agenda. It is thus helpful, when picking your candidate, to understand the unique fiduciary role our legislators have under the Alaska constitution.
A key part of the statehood debate was how Alaska would support itself after it entered the union. In territorial days, there were not sufficient tax revenues to support a central government to fund services for such a large area. The deal reached in the Statehood Compact was that the federal government would allow the new state to select and have title transferred to 103 million acres, or about a third of Alaska, to derive natural resource revenues to pay for state government.
But there was a catch. Alaska can sell ownership of the surface estate to that acreage, but it cannot sell the right to develop underground minerals. Federal law requires the state to maintain ownership of those resources so that profits from development can fund the state treasury. The framers of our constitution provided those lands are held in trust by the state government to be managed for the maximum benefit of the people of Alaska.
Consequently when it comes to oil and gas, the role of our legislators and members of the executive branch, as trustees, is to maximize the value of development for the benefit of Alaskans. That obligation is similar to the fiduciary obligation board members and managers of American companies owe their shareholders, which is to maximize shareholder wealth.
Several years ago the President of Exxon Mobil, Lee Raymond, was asked if his company would build more domestic refineries to assist the U.S.'s security interests. He replied, "Why would I do that? ... I'm not a U.S. company and I don't make decisions based on what's good for the U.S." His point was that he was a fiduciary for an international company and makes decisions, not based on America's interests, but on what is good for his shareholders.
Representatives of Alaska, as trustees of our resources, owe its people the same bullheaded single-mindedness when making decisions about Alaska's resource wealth. Their constitutionally mandated role is that of a fiduciary representing our interests, not that of BP, Exxon Mobil or Conoco Phillips.
Just as Exxon Mobil does not surrender its money except to benefit its shareholders, the state should not surrender a single dollar in oil revenues unless it can be demonstrated doing so will result in a positive return. That makes tax reductions an investment, not a giveaway.
In the last legislative session neither Gov. Parnell, nor the three oil companies on whose behalf he advocated, attempted to make a business case for Alaska reducing taxes $2 billion annually. Members of the bipartisan Senate collation called them on it, and methodically went about rewriting the governor's tax reduction bill to ensure revenues returned to industry would be reinvested in Alaska. In doing so, they behaved as board members of Exxon Mobil would have if Lee Raymond had brought forward a bad business deal; they rejected management's plan in favor of one that was in their shareholders' interests.
Regardless of whether you are a Republican or Democrat, I hope you remember on Election Day that Alaska must elect statesmen. Vote for candidates who will put Alaska's future ahead of party politics, independent thinkers who will not be influenced by the surge of fundraising at Petroleum Club events. Vote for candidates who will fulfill their fiduciary and constitutionally mandated responsibilities to manage Alaska's resources for the maximum benefit of Alaskans.
Bill Walker owns an Anchorage law firm that focuses on oil, gas and municipal law. He ran for governor in the 2010 Republican primary.